Government Fails to Collect Public Revenue
|December 31, 2006||Posted by Staff under Progress Report, The Progress Report|
Government Fails to Collect Public Revenue
Citizens Sue Welfare Cheats
Here are excerpts from an article appearing the Washington Post (U.S.).
by T.R. Reid
As soaring prices prompt huge increases in gas and oil drilling on public land, an ad hoc posse of state governments, Indian tribes and individual citizens is charging that big energy companies are shortchanging taxpayers by billions of dollars.
They say drilling companies and pipeline operators are understating the amount and the quality of the natural gas they pump on public land, and are paying far less in royalties than required by law.
State and tribal governments rely on Washington — specifically, the Minerals Management Service in the Department of the Interior — to determine what royalties are owed and to collect the money. States and tribes then receive their shares from the federal government.
Two organizations — the Council of Energy Resource Tribes, representing 57 tribes in the nation and Canada, and the State and Tribal Royalty Audit Committee, representing 11 state governments and eight tribes, mainly in the West — are pressuring the Minerals Management Service and the gas companies for honest accounting and higher royalty payments.
“With the current operation in Washington, you just get the feeling that the companies can report any production number they want to, and the government is not going to check,” said Dennis Roller, an auditor with the state of North Dakota who serves as vice chairman of the royalty audit committee.
“And, of course, the result is that taxpayers aren’t getting paid for the gas that they own,” he said. “We have asked them many times to do the auditing they are supposed to do. But they just stonewall.”
The Bush administration has sided with the corporations.
Five years ago, however, energy companies paid more than $400 million to settle charges that they had not paid royalties owed on oil taken from public land. Today, most of the focus is on natural gas production, which is booming on public land in the Rocky Mountain West.
“We think the underpayment on gas royalties could be much bigger than the fraud that was exposed for the oil wells,” said Beth Daley, of the Project on Government Oversight, a Washington-based interest group that plays a coordinating role among the various groups challenging the energy companies.
“The industry seems to have all sorts of ways to avoid paying what it owes for this gas,” Daley said. “And the Bush administration has been loosening the rules. At a time when drilling is way up, the government has cut back on its audits, so it is easier for a company to get away with fraud.”
One veteran of the Western oil patch, independent driller Jack Grynberg, of Centennial, Colorado, charges that the industry owes the federal government more than $30 billion in unpaid royalties for natural gas alone. By comparison, the so-called “deficit-cutting” bill that Congress passed earlier this year would save only $39 billion over five years.
The nation’s major reserves of oil and gas are found in the Rocky Mountains, the Southwest and Alaska, regions where much of the land is owned by federal or state governments or Indian tribes. When gas and oil companies drill wells on public or tribal land, they are required to pay royalties of about 16 percent of the value at the wellhead, before the fuel is shipped to market and refined.
“We are convinced that there is serious underreporting of production and serious underpayment of royalties owed to the tribes,” said Roger Fragua, deputy director of the Council of Energy Resource Tribes. “The federal government, at least in this administration, is not protecting our interests. So we are looking for ways to go after the companies ourselves.”
Critics of the Bush administration’s failure to manage royalty payments have been looking for ways to circumvent the government and reach the energy corporations directly. Some think they have found the right weapon in a federal statute, the False Claims Act, dating to the Civil War.
Under the law, anyone can file a civil suit known as a qui tam action, a Latin term that means the plaintiff is acting “on behalf of” the government. The procedure can be extremely costly for a defendant who is found to have cheated the federal government; the statute gives courts the right to assess damages three times the amount owed. The private litigant, in turn, gets a significant share of the damages.
“The fact is, most False Claims Act cases settle out of court,” noted James Moorman, president of the Washington-based False Claims Act Legal Center. “If it looks like a case is ready to go to trial, the defendants are so terrified of the triple-damage penalty they could face that they sit down and start talking settlement terms with the plaintiff.”
To date, Moorman said, the biggest payments in false claims cases have involved medical or drug companies charged with Medicare or Medicaid fraud. But the potential judgment in a suit for underpayment of oil and gas royalties could dwarf them.
And recently, the Council of Energy Resource Tribes held a day-long session to recover its unreceived royalty payments.
“We are looking hard at that False Claims Act,” Fragua said. “We can’t depend on the Interior Department to collect the money we are rightfully owed. So we think it may be time to start fighting this in the courts.”
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